1 INT’L REGIONAL STRATEGIES 7

2  Why do companies develope international regional strategies?  Strategic options for national players  What is international regional strategy?  International regional co-ordination of key business functions

3 Worldwide Internationalregional International market entry and development Restricted national market scope InternationalisationRetrenchment Phase 1Phase 2 Phase 3 Phase 4 Figure 7.1. The phase model of international business development Restricted national market scope International market entry and development International regional Worldwide competitor

4 What is International Regional Strategy  Focus on a given geographical area  Market entry and selection: not simply on a country by country basis  Network of interlinked international markets  Economic integrations: u NAFTA dominated by USA u EU: collection of national states

5 FEATURE Free Trade Area Customs Union Common Market Economic Union Political Union Removal XX X X X of internal tariffs CommonX X X X external tariffs Unrestricted X X X movement of capital and labour Convergence X X of economic policies Political X integration Figure 7.2 Forms of economic integration

6 Examine three conditions: (1) Extent of operations, applying and leveraging knowledge, resources regional exporter (2) Production facilities, value-adding activities located outside? (1)+(2): fragmented int’l reg. strategy (3) Business functions: organized on the needs of the region? Co-ordinated strategy

7 International regional strategies International regional strategies CharacteristicsExporterFragmentedCo-ordinated (1) Regional scope (2) Located outside (3) Functions on regional basis YES NO YES NO YES Overall Strategy Supplies from home production base Value adding facilities at home Series of country strategies No or little co- ordination between market Region as a unified market Co-ordinates functions regionally

8 Why to Develope Int’l Regional Strategy? EXTERNAL TRIGGERS  metatrends,  competitive forces  Standardization opportunities  Emergence of cross- border customers, distributors  Competitive interdependencies  Reducing product life cycles INTERNALTRIGGERS INTERNAL TRIGGERS  Past operating  Vision/mindset  Core competence  Organizational learning  Administrative heritage

9 External triggers Previous phase of international business development International regional strategy Internal triggers Figure 7.3 The development of an international regional strategy Move to next phase Move to next phase of international business development Retreat to previous phase Retreat to previous phase of international business development

10 Strategic Options for National Players  Not too easy to respond  Depends on individual context  Bipolarization: possible choices u Defendable national niche u Developing to be international  Not all national players able to cross borders!!! u Niche occupied u Unable to find alternative markets  Fewer company serves regional markets – more absorbed or replaced!!

11 Product range Geographical scope Restricted national market scope Interna- tional region NarrowBroad Company C National niche strategy National broad-based strategy Company A Company B Regional niche strategy Regional broad-based strategy Key:= Zone of transition Figure 7.4 Product-market grid

12 A Options for Company A STRATEGIC OPTIONS  Do nothing  Develope broad- based regional strategy  Retreat to niche  WithdrawSTRATEGICIMPERATIVES  Cease trading  Extend scope, configure functions to regional market  Refocus business to niche  Sell business, exit

13 B Options for Company B STRATEGIC OPTIONS  Do nothing  Retreat to national niche  WithdrawSTRATEGICIMPERATIVES  Cease trading  Find niche and refocus business  Sell business, exit

14 C Options for Company C STRATEGIC OPTIONS  Do nothingSTRATEGICIMPERATIVES  May be able to continue to develope its int’l presence  Could be vulnerable from broad-based suppliers or niche players

15 Product range Geographical scope Restricte d national market scope Interna- tional region NarrowBroad Company C National niche strategy National broad-based strategy Company A Company B Regional niche strategy Regional broad-based strategy Key:= Zone of transition Figure 7.5 Product-market options available for Companies A and B in the face of the need to operate with a regional strategy in their existing markets

16  Considerable challenge u To completing market coverage u Developing single strategy to all markets u To manage the transitionTASKS Centralized decentralized to into a hubnational operations into a hub national operations (Co-ordination) (no co-ordination) (Co-ordination) (no co-ordination) Balance changed between tasks! Co-ordination of Key Business Functions

17 Level of international co-operation Complete centralisation All functions undertaken by the region. No national structures Regional centre directs Regional centre co-ordinates Regional managers able to exert authority over national subsidiaries Formal co-ordinating mechanisms Informal co-operation Complete decentralisation High Low Regional staff operates to influence and co-ordinate national managers Formal committee structures and systems Meeting to share information and ideas No co-ordination between national subsidiaries Figure 7.6 Centralisation versus decentralisation of key business functions

18 Concern accompanying co-ordinated regional strategy:  Contact with national market will be diluted  Take steps to minimise the likelyhood!!

19 Co-ordinate functions  Marketing  Human resources  Operations  Logistics  Finance

20 Country ACountry B Country CCountry D (i) Logistics functions organised on a country by country basis Figure 7.7 Changing patterns of distribution for international regions

21 Country ACountry B Country CCountry D (ii)Develop. of a pan-regional logistics function for a reg. exporter Figure 7.7 Changing patterns of distribution for international regions Regional exporter

22 Country ACountry B Country CCountry D (iii) Development of a pan-regional logistics function for a co-ordinated international regional strategy Figure 7.7 Changing patterns of distribution for international regions

23 Table C7.1 Network consolidation,